CANADA FX DEBT-C$ weakens as evidence mounts of slower growth

Fri May 20, 2016 10:16am EDT
 
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* Canadian dollar at C$1.3125, or 76.19 U.S. cents
    * Bond prices slightly lower across the maturity curve

    By Fergal Smith
    TORONTO, May 20 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Friday after
weaker-than-expected retail sales data added to evidence that
the economy slowed heading into the second quarter.
    Canadian retail sales fell 1 percent in March, exceeding
economists' forecasts for a decrease of 0.6 percent, as
consumers bought fewer cars, while separate data from Statistics
Canada showed that core inflation rose to 2.2 percent.
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    The mixed data leaves the Bank of Canada on hold next week,
keeping a watch on the wildfire in Alberta, said David Watt,
chief economist at HSBC Bank Canada, who expects the central
bank to ease before year end as lack of momentum in the economy
becomes more evident.
    Economists say second-quarter growth may slow to a
standstill, impacted by a wildfire that has cut production in
Alberta's oil sands. 
    Firefighters battling a massive blaze in Canada's energy
heartland could see a second day of rainfall and winds, expected
to beat flames back from key oil sands facilities, as a producer
announced a restart in operations. 
    Canadian Prime Minister Justin Trudeau suggested on Thursday
that a C$30 billion budget deficit was not a hard limit as the
government's focus should be on spurring economic growth.
 
    At 9:56 a.m. EDT (1356 GMT), the Canadian dollar 
was trading at C$1.3125 to the greenback, or 76.19 U.S. cents,
slightly weaker than Thursday's close of C$1.3105, or 76.31 U.S.
cents.
    The currency's strongest level of the session was C$1.3077,
while its weakest was C$1.3133. On Thursday, the loonie touched
its weakest in nearly six weeks of C$1.3155.    
    Canadian government bond prices were slightly lower across
the maturity curve in sympathy with U.S. Treasuries. The
two-year price dipped 1.5 Canadian cents to yield
0.633 percent and the benchmark 10-year declined 15
Canadian cents to yield 1.364 percent.
    On Thursday, the 10-year yield touched its highest in
two-weeks of 1.394 percent.

 (Reporting by Fergal Smith; Editing by Nick Zieminski)